Solar PACE Loan Problems: How PACE Liens Work and What Homeowners Can Do

If your solar panels were paid for through an extra line on your property tax bill, you probably have a PACE assessment, not an ordinary solar loan. PACE stands for Property Assessed Clean Energy. It works differently from the loans and leases most solar buyers sign, so the problems it causes, and the ways out of them, are different too.

This guide is for homeowners who are now finding out what that difference means. Typical surprises are a property tax bill that jumped by thousands of dollars, a refinance that stalled at the title search, or a contract the homeowner does not remember signing. It covers how PACE works, which protections apply, how to check whether yours was sold properly, and the realistic options for resolving it.

This article is general information, not legal advice. PACE rules vary by state, county, and the date your assessment was signed. CredibleLaw is a legal resource and referral network, not a law firm.

What a solar PACE loan actually is

With PACE, a local government program (usually run day to day by a private administrator) pays your solar installer up front. You repay that amount, plus interest and fees, as a special assessment added to your property tax bill. Repayment usually runs 10 to 20 years, and the California Attorney General’s office stresses that PACE is a loan that must be repaid, not a free government program.

Three features set PACE apart from the other financing covered in our solar loan problems guide:

• The debt is tied to the property, not to you personally. It stays with the house, and if you sell, the buyer’s lender may require it to be paid off first.
• It is collected like a property tax. If you pay taxes through a mortgage escrow account, your monthly mortgage payment can rise sharply once the assessment hits your tax bill.
• It often outranks your mortgage. In most PACE programs the assessment takes lien priority ahead of the first mortgage. That is why it causes problems with selling and refinancing (more on that below).

A PACE assessment is also not the same as the UCC fixture filing many solar lenders record. If your paperwork shows a UCC-1 rather than a tax assessment, see our guide to solar UCC lien removal instead.

Where residential PACE is offered

Residential PACE has only ever operated in a handful of states, mainly California, Florida, and Missouri, according to a Florida Senate bill analysis. Commercial PACE is far more widespread, but it is a separate product. If you live outside those states and a salesperson called your solar financing “a government program on your tax bill,” check your county tax records. You may have a different product than you were told.

The most common solar PACE problems

The complaints regulators have documented follow a few patterns:

1. “It’s a government program” sales pitches. Contractors have sold PACE door to door as a free or government-backed rebate. In reality, private for-profit companies run the financing.
2. Misleading claims about selling and refinancing. In their 2022 action against Ygrene Energy Fund, the FTC and California alleged that homeowners were told the lien would simply transfer to a buyer or would not affect refinancing.
3. Liens recorded without real consent. The same complaint described electronic signing that kept homeowners from meaningfully reviewing disclosures. The FTC later said some contractors had forged homeowners’ signatures. If your signature looks wrong, our page on forged solar contract signatures covers the steps that apply.
4. Unaffordable assessments. For years, PACE was approved mainly on home equity and tax payment history, not on whether the household could afford the payments.
5. Payment shock through escrow. Many homeowners never see the assessment until the mortgage servicer raises the escrow payment to cover it.

The Ygrene settlement shows both what enforcement can and cannot do. Ygrene agreed to a court order and a $3 million fund. The FTC later mailed 960 checks totaling more than $2.9 million, but it notes that the settlement did not remove Ygrene’s liens. Those liens remain until they are paid.

The federal rule that took effect March 1, 2026

For most of PACE’s history, federal lending law did not treat it as credit, so Truth in Lending Act protections did not apply. That changed with the CFPB’s Residential PACE Financing rule, published in January 2025 and effective March 1, 2026. Under the rule:

• PACE financing counts as credit under TILA and Regulation Z.
• Creditors must make a mortgage-style ability-to-repay determination before approving it.
• Homeowners get a Loan Estimate and a Closing Disclosure adapted for PACE.
• PACE companies “substantially involved” in the credit decision can face TILA civil liability for violations.
• As credit secured by a home, a PACE transaction becomes subject to TILA’s three-day right of rescission.

Two cautions apply. First, the rule generally covers PACE transactions entered into on or after March 1, 2026. An older assessment is judged mainly under the state law and contract in place when it was signed. Second, an industry trade group’s challenge to the rule is pending on appeal in the Eleventh Circuit. No court had blocked the rule as of early 2026, but check its current status before relying on it.

State protections: California and Florida

California has the most detailed PACE consumer law. Under Streets and Highways Code § 5913, the program administrator must make a recorded oral confirmation call covering the contract’s key terms in plain language. On that call the homeowner must be told about the three-business-day right to cancel. The DFPI licenses PACE administrators. Since 2018, contractors generally cannot start work until the cancellation period ends, and administrators cannot waive or defer the first payment. Under § 5940, canceling the PACE financing within that window can also cancel the related home improvement contract.

In practice, this gives California homeowners concrete questions to ask:

• Was there a confirmation call?
• Was the salesperson in the room during it?
• Was the call in your preferred language?
• Did installation begin before the cancellation window closed?

Administrators keep records of these calls, and you can request them.

Florida substantially rewrote its PACE statute in 2024. SB 770, effective July 1, 2024, restructured s. 163.08, F.S., and added new residential consumer protections and seller disclosure requirements. Which version of the rules applies to you depends on when you signed, so pull the date off your financing agreement first.

General state home-solicitation and cancellation laws can also apply alongside these PACE-specific rules, so a homeowner may have more than one route to cancel.

How PACE affects selling or refinancing

Because most PACE assessments take priority over the mortgage, Fannie Mae will not buy a mortgage on a property with an outstanding PACE lien that has that priority. In practice, a refinance or a buyer’s conventional, FHA, or VA loan usually requires the PACE balance to be paid off at closing, often from the loan or sale proceeds. If you are mid-sale, our guide to selling a home with a solar lien walks through the closing mechanics.

What to do if you have a solar PACE problem

1. Confirm what you have. Look for a PACE or special assessment line on your county property tax bill, and for a recorded assessment contract or notice in county land records.
2. Gather the paperwork. You need the assessment contract, the solar contract, the financing estimate and disclosure, the right-to-cancel form, and any emails or texts from the salesperson. In California, also request the confirmation call recording.
3. Check the dates. The signing date tells you whether the March 2026 federal rule applies and which version of your state’s law governs.
4. Look for consent problems. Signs include a signature you do not recognize, an email account you did not create, a call you did not take, or work that started before the cancellation window closed. These issues carry the most legal weight.
5. Do not stop paying property taxes without advice. The assessment is collected through the tax system. Unpaid property taxes follow county tax collection rules, which can eventually put the home at risk. Disputes are better pursued while the account stays current.
6. File complaints with the right regulator. In California, PACE complaints go to the DFPI’s PACE complaint portal. For deceptive sales practices anywhere, report to the FTC and your state attorney general. For a PACE transaction signed on or after March 1, 2026, the CFPB complaint portal is also available.
7. Get a lawyer’s review before negotiating a payoff or release. Possible outcomes include canceling within a statutory window, releasing a lien entered without consent, reducing the balance, or bringing claims against the contractor. Which one fits depends on facts a lawyer needs to see.

Get help from an attorney in CredibleLaw’s network

CredibleLaw connects homeowners with independent consumer protection attorneys who handle solar financing disputes, including PACE assessments. An attorney can review your assessment contract, disclosures, and signing timeline. They can then explain which options realistically apply in your state. Learn more on the solar fraud attorney page, or call 888-201-0441 to request a referral.

CredibleLaw is a legal referral network, not a law firm. Contacting CredibleLaw does not create an attorney-client relationship. Results depend on the facts of each case, and no outcome is guaranteed.

Frequently asked questions

What is a solar PACE loan?

A solar PACE loan is financing for solar panels that you repay as a special assessment on your property tax bill, usually over 10 to 20 years. The debt is attached to the property, and in most programs it takes priority over your mortgage.

How do I know if my solar panels were financed with PACE?

Check your county property tax bill for a PACE or special assessment line, and search your county land records for a recorded assessment contract. If your mortgage escrow payment rose sharply after installation, a PACE assessment is a common cause.

Can I cancel a solar PACE assessment?

Sometimes. California gives homeowners a three-business-day right to cancel after the required disclosures, and the CFPB rule applies TILA’s three-day rescission right to PACE transactions entered into on or after March 1, 2026. After those windows close, cancellation usually depends on proving problems like missing consent, forgery, or violations of state PACE law.

Does the March 2026 CFPB rule apply to my older PACE assessment?

Generally not. The rule covers PACE transactions entered into on or after March 1, 2026. Older assessments are governed mainly by the state law and contract terms in effect when they were signed, though those can still provide remedies.

Will a PACE lien stop me from selling or refinancing my house?

It often complicates both. Because most PACE liens outrank the mortgage, Fannie Mae and similar programs generally require the PACE balance to be paid off at closing before they will finance the property.

What happens if I stop paying my PACE assessment?

Because it is collected with your property taxes, an unpaid PACE assessment is treated like delinquent property tax under your county’s collection rules. That can eventually put the home at risk, so speak with an attorney before withholding payment as part of a dispute.